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Financial Sustainability Evaluation and Forecasting Using the Markov Chain: The Case of the Wine Business

Author

Listed:
  • Nataliya Rekova

    (Donbass State Engineering Academy, 84300 Kramatorsk, Ukraine)

  • Hanna Telnova

    (Donbass State Engineering Academy, 84300 Kramatorsk, Ukraine)

  • Oleh Kachur

    (PJSC “Artwinery”, 84500 Bakhmut, Ukraine)

  • Iryna Golubkova

    (Maritime Law and Management Faculty, National University “Odessa Maritime Academy”, 65000 Odessa, Ukraine)

  • Tomas Baležentis

    (Lithuanian Institute of Agrarian Economics, 03220 Vilnius, Lithuania)

  • Dalia Streimikiene

    (Lithuanian Institute of Agrarian Economics, 03220 Vilnius, Lithuania)

Abstract

This paper proposes a framework for assessing the financial sustainability of a wine producing company. The probabilistic approach is used to model the expected changes in the financial situation of an enterprise based on the historical trends. The case of an enterprise in Ukraine is considered as an illustration. The Markov chain is adopted for the forecasting exercise. Using the Markov chain framework allows one to predict the probability of financial security change for several periods ahead. The forecast relies on the transition probabilities obtained by exploiting the historical data. The proposed framework is implemented by construction of the financial security level transition matrices for three scenarios (optimistic, baseline and pessimistic). The case study of a Ukrainian wine producing company is considered. The possibilities for applying the proposed method in establishing anti-crisis financial strategy are discussed. The research shows how forecasting the financial security level of a company can serve in anti-crisis financial potential buildup.

Suggested Citation

  • Nataliya Rekova & Hanna Telnova & Oleh Kachur & Iryna Golubkova & Tomas Baležentis & Dalia Streimikiene, 2020. "Financial Sustainability Evaluation and Forecasting Using the Markov Chain: The Case of the Wine Business," Sustainability, MDPI, vol. 12(15), pages 1-17, July.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:15:p:6150-:d:392345
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    References listed on IDEAS

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    1. Hamam, Manal & Spina, Daniela & Selvaggi, Roberta & Vindigni, Gabriella & Pappalardo, Gioacchino & D’Amico, Mario & Chinnici, Gaetano, 2023. "Financial sustainability in agri-food supply chains: A system approach," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 25(2), October.
    2. Manal Hamam & Daniela Spina & Roberta Selvaggi & Gabriella Vindigni & Gioacchino Pappalardo & Mario D'Amico & Gaetano Chinnici, 2023. "Financial sustainability in agri-food supply chains: A system approach," Economia agro-alimentare, FrancoAngeli Editore, vol. 25(2), pages 135-154.

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